President William Ruto’s administration is proposing to remove at least three taxes that will benefit Kenya’s wealthy citizens who import choppers. The Kenya Kwanza has submitted several tax proposals to Parliament that analysts say will hurt the country’s poor despite the high cost of living. To fund Ruto’s record Sh3.59 trillion budget for the 2023/23 financial year, the National Treasury plans to increase fuel and salary taxes on the middle class. The Finance Bill, 2023, contains proposals to exempt importers of aircraft, particularly choppers, from paying the 16% Valued Added Tax (VAT).
The government has also proposed eliminating the 3.5% import declaration fee (IDF) and the two per cent Railway Development Levy (RDL). The biggest beneficiaries of this policy change are buyers of aircraft not exceeding 2,000 kilograms and helicopters of less than two tonnes and aircraft of more than 2,000 kilograms. Robert Waruiru, a partner in charge of tax and regulatory at Ichiban Tax & Business Advisory, said that the buyers of choppers would be the biggest beneficiaries.
Under retired President Uhuru Kenyatta’s administration, the three levies were reintroduced, significantly impacting the aviation industry. Choppers have become a popular mode of transport for Kenya’s wealthy, including politicians, while millions of the poor struggle with abject poverty.
Ironically, the Ruto administration has raised more taxes on the middle class, including enhanced salary levies to fund the pensions and the affordable housing programme. Prior to July 2021, purchasing specific types of helicopters, aeroplanes, and aircraft gear, as well as parts such as tyres, did not attract any taxes. The exemption also applied to individuals looking to lease or hire helicopters.
Persons seeking to hire or buy aeroplanes of an unladen weight exceeding or not exceeding 2,000 kilogrammes began paying VAT on their imports following the Finance Act 2020. It costs between Sh150,000 to Sh400,000 per hour to hire a helicopter. The wealthy are expected to take advantage of the new exemption, resulting in increased flight schedules in the sky, even as the cost of living rises.
